Court File and Parties

CITATION: Sharpe and Sharpe v. The Capital Markets Tribunal, 2023 ONSC 2819

DIVISIONAL COURT FILE NO.: 168/23

DATE: 20230516

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: DAVID SHARPE and NATASHA SHARPE, Applicants

AND:

THE CAPITAL MARKETS TRIBUNAL, Respondent

BEFORE: Matheson J.

COUNSEL: Johanna Braden, for the Ontario Securities Commission/Moving Party Brian Greenspan, for David Sharpe, Applicant/Respondent on the Motion Lawrence Thacker and Jonathan Chen, for Natasha Sharpe, Applicant/Respondent on the Motion Erin Pleet, for the Receiver of Bridging Finance

HEARD at Toronto: May 15, 2023 (by videoconference)

ENDORSEMENT

[1] The Ontario Securities Commission (“OSC”) moves to quash this application for judicial review as premature. The underlying Capital Market Tribunal proceedings are far from complete. The decision at issue in this judicial review dismissed a motion for additional disclosure in relation to stay motions that have not yet been decided by the Tribunal. Further, the merits hearing before the Tribunal has not yet been commenced or decided. There must be exceptional circumstances in order for the Court to hear this application for judicial review at this early stage.

[2] For the reasons set out below, this motion is granted.

[3] By way of brief background, the applicants are the subject of ongoing proceedings before the Capital Markets Tribunal arising from a statement of allegations against them issued in March 2022. Later that year, the applicants brought motions to stay the Tribunal proceedings as an abuse of process because, as found by the Tribunal, the OSC had breached the Securities Act, R.S.O. 1990, c. S.5. The applicants’ compelled testimony had been disclosed in a receivership application in the Superior Court without first getting the required order permitting the disclosure. As a result, there was also significant additional public disclosure.

[4] The Tribunal granted the applicants’ request that their stay motions be heard before the merits hearing because they raise a distinct issue.

[5] The applicants then brought motions for additional disclosure on the basis that the requested disclosure was needed for their stay motions. By a decision dated January 30, 2023, those disclosure motions were dismissed by the Tribunal (the “Disclosure decision”).

[6] In this application for judicial review, the applicants seek to challenge the Disclosure decision. The applicants sought an adjournment from the Tribunal, suspending the Tribunal proceedings pending the disposition of the judicial review. The adjournment was denied. The stay motions are set to be heard on May 23 and 26, 2023. Counsel advised at the hearing in this Court that there is also an outstanding motion regarding summonses. The applicants seek to summons OSC staff as witnesses on their stay motions. After the oral hearing in this Court, counsel provided me with the Tribunal decision on that issue, dated May 15, 2023, dismissing the motion for summonses with reasons to follow.

[7] It is well-established that this Court will not hear a premature application for judicial review absent exceptional circumstances. I adopt the following summary discussion of these principles as set out by Swinton J. in Cheng v. Ontario Securities Commission, 2018 ONSC 250, as follows:

[21] …Generally, courts are reluctant to interfere in ongoing proceedings before administrative tribunals for good policy reasons. However, in exceptional circumstances, a court may exercise its discretion to hear an application for judicial review of an interlocutory decision.

[22] Such cases are rare. As Nordheimer J. stated in Azeff v. Ontario Securities Commission 2014 ONSC 5365 (Div. Ct.) at para. 7, the exception should be reserved for cases where the ruling complained of is “so tainted” that the result of the later judicial review would be “preordained” at para. 7... He did so in a case where the applicants alleged a denial of natural justice.

[23] The Court of Appeal in Volochay v. College of Massage Therapists of Ontario, 2012 ONCA 541 has emphasized that even a breach of the rules of natural justice or a true question of jurisdiction is not sufficient to warrant automatic access to judicial review (at para. 63). See also Lourenco v. Hegedus, 2017 ONSC 3872 (Div. Ct.) at para. 6:

In rare cases this court will intervene on an application for judicial review in the midst of an administrative process where there are strong reasons to believe that the ongoing process is so deeply flawed that there is a strong likelihood that it will have to be run over again, usually on the basis of bias, reasonable apprehension of bias or want of jurisdiction.

[8] The doctrine of prematurity seeks to avoid fragmentation and delay of administrative proceedings. As set out in Cheng, at para. 30, the applicants must show that this is a rare case where early intervention is warranted because “there is a danger of manifest unfairness in the hearing.” The applicants submit that this is such a case in relation to their upcoming stay motions.

[9] This case has some common ground with Cheng. In Cheng, the applicant sought to stay the tribunal proceedings because the OSC staff had documents that were subject to the applicant’s solicitor/client privilege. The stay motion was dismissed. The applicant sought to judicially review the dismissal of the stay motion even though the merits hearing had not yet even begun. This Court quashed the application for judicial review based upon prematurity.

[10] Here, there are two levels of prematurity. The stay motions have not yet been decided. It is not yet known whether the underlying Tribunal proceedings will continue or be stayed. Further, if they continue, the Tribunal proceedings have not yet reached the merits hearing let alone a final determination.

[11] The applicants submit that this is a case where the court should hear their otherwise premature application for judicial review. They submit that the Disclosure decision is so fatally flawed that this Court should intervene immediately. The applicants submit that in the absence of the requested disclosure, they have been deprived of the right to a fair hearing of their stay motions. They submit that these are the required exceptional circumstances.

[12] The applicants put forward several arguments in support of this position. For the purpose of this motion, I accept that the evidentiary record needed for the stay motions is distinct from the evidence needed for the merits hearing, one of the potentially relevant considerations. However, the record on the stay motion itself is not necessarily complete. It may well be different from the record on the disclosure motions.

[13] Most significantly, in my view, the applicants submit that because of the Disclosure decision, it is a “near certainty” that they will lose their stay motions. This arises because the Tribunal applied a threshold test that required the applicants to show that they had a tenable case for abuse of process to get the disclosure. I recognize that there are statements to that effect in the Disclosure decision, saying that threshold had not been met on those motions.

[14] However, reading the reasons for decision as a whole, they include a discussion that focuses the Disclosure decision on the nature of the documents being sought and their potential relevance to the stay motions. Those documents have been generally referred to as “staff records”. As set out in the reasons for decision, those documents were sought because they might show intentional wrongdoing or improper communications by staff. The Disclosure decision found that there was no evidentiary foundation in that record for an allegation of bad faith. In turn, there was an inadequate foundation for the disclosure sought on the motions. At least arguably, the Disclosure decision is limited to that issue, specifically disclosure of the particular documents in relation to bad faith. Bad faith is not a prerequisite to a finding of abuse of process.

[15] I pull together several of the arguments before me in this way. Due to statements made in the Disclosure decision, the applicants are concerned that they will not get a full and fair hearing of their motions to stay. They are concerned that they will face arguments that comments made in prior interlocutory decisions, including the Disclosure decision, will be held up against them to say that their stay motions have already been decided, against them, at least in part. They are concerned that the Tribunal will decide the stay motions on that basis. However, the OSC confirms that it does not intend to take the position that any issue in the stay motions has already been determined and I am not prepared to assume that the Tribunal will fail to provide a fair hearing.

[16] I recognize that the Disclosure decision includes a discussion of certain arguments that the OSC will raise again on the stay motions. However, the Tribunal will be called on to address the full grounds for the stay motions on the record on those motions, whatever that may include. I do not accept that the stay motions have been predetermined by the Disclosure decision. The outcome remains to be seen.

[17] The applicants accept that this Court is not required to engage in a thorough analysis of the merits of the judicial review application to decide the prematurity issue: Toronto Transit Commission v. Amalgamated Transit Union Loc. 113, 2020 ONSC 2642, at para. 33. However, they submit that if the ruling to be reviewed is “clearly wrong” or “fatally flawed” and will have consequences that cannot be redressed on an appeal or judicial review of the final decision, the court may agree to hear the premature application. They rely on Toronto Transit Commission v. Amalgamated Transit Union Loc. 113 and Micanovic v. Intact Insurance, 2022 ONSC 1566 (Div. Ct.).

[18] This submission is predicated on finding that the Disclosure decision is “clearly wrong” or “fatally flawed”. Leaving aside the question of whether that would be sufficient for exceptional circumstances, I am not persuaded that the Disclosure decision falls within those descriptions. Further, a decision may be wrong and a judicial review nonetheless premature. The disposition of this motion to quash should not be taken as an endorsement of the Disclosure decision.

[19] One of the applicants’ central submissions about the merits of the Disclosure decision is based upon R. v. Haevischer, 2023 SCC 11, which was released after the Disclosure decision. R. v. Haevischer addressed the threshold for a summary dismissal of an accused’s application for a stay due to an abuse of process. The Supreme Court held that the accused’s application for a stay should not be dismissed unless it is “manifestly frivolous”. The applicants submit that this recent case shows that the Tribunal applied the wrong test on the disclosure motion.

[20] The OSC submits that the applicants are free to raise R. v. Haevischer in the ongoing Tribunal proceedings, including not only the summonses motion and the stay motions, but also in an application to reconsider the Disclosure decision under s. 144.1 of the Securities Act.

[21] Beginning with s. 144.1, the applicants may apply to have the Disclosure decision revoked or varied. The OSC agrees that the applicants can put R. v. Haevischer forward as a reason for doing so although the OSC would then contest the application on its merits.

[22] I asked why the applicants had not yet applied under s. 144.1. The applicants explained that in their failed attempt to get an adjournment, the Tribunal made a comment that suggested they would not entertain those arguments. More specifically, the reasons on the adjournment say as follows: “Whether Haevischer has any implications for the Tribunal’s [Disclosure decision] is a matter for the Divisional Court hearing the [applicants’] judicial review.”

[23] Given that statement by the Tribunal, the applicants’ explanation is reasonable. However, I do not conclude that the Tribunal’s statement is a barrier to a s. 144.1 application. At the time of the adjournment decision, there was no s. 144.1 application underway. I therefore conclude that, in making the above statement about this Court, the Tribunal was not considering whether R. v. Haevischer could be raised under s. 144.1. The OSC not only submits that the applicants may do so, but that they must, before seeking any relief in this Court.

[24] Nor did the Tribunal comment on the ability to raise R. v. Haevischer on the summonses motion. According to the OSC, they were free to do so. The Tribunal did comment on the stay motions, as follows: “If the [applicants] regard Haevischer as pertinent to their stay motions before this Tribunal, they may advance that argument when the stay motions are heard.”

[25] The applicants may make what they can from this recent Supreme Court of Canada decision, including in an application that they may still bring under s. 144.1 of the Act and in the ongoing proceedings before the Tribunal. Indeed, administrative law principles may also require them to do so.

[26] The applicants submit that there is no issue of fragmentation because the Tribunal denied their request for an adjournment pending the determination of their application for judicial review. The two can therefore proceed in parallel. This overlooks the fragmentation that is already happening. The doctrine of prematurity is founded on the principle that the administrative proceedings should be completed before a party comes to this Court. Issues such as disclosure may then be raised if the applicants dispute the outcome of the Tribunal proceedings. It is apparent that there are already complications occurring as a result of parallel and overlapping proceedings.

[27] The applicants also submit that they will not be able to recover their costs of multiple motions and proceedings, yet they are currently creating that multiplicity by coming to this Court at a very early stage.

[28] Having regard for all the materials and submissions, I conclude that the OSC has demonstrated that it is manifest that this application for judicial review will not be heard on the merits due to prematurity. The stay motions have not yet been decided, nor have the merits of the underlying allegations. I note that an attempt to judicially review the stay decision would also likely be met with a prematurity argument (see, e.g., Cheng). However, that issue should be decided if and when it arises, not now.

[29] This motion is therefore granted. The application for judicial review is quashed. The applicants shall pay costs to the OSC fixed at the agreed amount of $5,000 in total and all inclusive.

Matheson J.

Date: May 16, 2023